CareRx Corp has closed its acquisition of the long-term care pharmacy division of Medical Pharmacies Group, a portfolio company of Clearspring Capital Partners. The purchase price is C$75 million, including C$70 million in cash. CareRx will fund the deal in part through a C$60 million debt financing from Crown Private Credit Partners. Pickering, Ontario-based Medical Pharmacies, a pharmaceutical care business, has been backed by Clearspring since 2011.
CareRx Completes Acquisition of Long-Term Care Pharmacy Division of Medical Pharmacies
TORONTO, Aug. 23, 2021 /CNW/ – CareRx Corporation (“CareRx” or the “Company”) (TSX: CRRX), Canada’s leading provider of pharmacy services to seniors living and other congregate care communities, announced today that it has closed the previously announced acquisition (the “Acquisition”) of the Long-Term Care Pharmacy Division (the “MPGL LTC Pharmacy Business”) of Medical Pharmacies Group Limited (“MPGL”). Following completion of the Acquisition, CareRx now serves over 92,000 residents in over 1,500 seniors and other congregate care communities across Canada, further expanding CareRx’s leading national footprint.
The MPGL LTC Pharmacy Business is expected to contribute run-rate annualized revenue of approximately $150 million and Adjusted EBITDA of $10 million to $12 million, as well as cost savings synergies of a minimum of $5 million, and is expected to be immediately accretive to CareRx’s earnings. The purchase price for the Acquisition was satisfied through the issuance of $70 million of cash and the issuance of 550,359 common shares of CareRx.
“Today marks the most significant step to date in the growth and transformation of CareRx into the clear leader of the institutional pharmacy sector in Canada,” said David Murphy, President and Chief Executive Officer of CareRx. “I am proud to welcome our new colleagues from MPGL, and I look forward to working with them to bring our two companies together and deliver a superior service offering to our home operator partners and their residents. The combined business is uniquely positioned to deliver continued growth and shareholder value, while playing a critical role in the provision of healthcare to the most vulnerable Canadians.”
Further to the previously announced debt commitment letter that was entered into upon announcement of the Acquisition, the Company has signed an amended and restated credit agreement with Crown Private Credit Partners Inc. (“CPCP”), under which new senior credit facilities of $60 million were advanced to the Company by CPCP and certain participants (the “Senior Facility”). $37 million of the Senior Facility was used to pay a portion of the cash closing price for the Acquisition and related transaction costs, with the remaining $23 million being used to repay the existing term loan with Crown Capital Partner Funding, LP. Interest on the Senior Facility will accrue at an annual rate of between 7.5% and 9% based on applicable financial covenants, and the Senior Facility will mature on the 5th anniversary of the Acquisition closing, subject to certain prepayment rights in favour of the Company.
In addition, upon closing of the Acquisition, the $63.3 million of proceeds raised from the brokered and non-brokered subscription receipt offerings that closed on May 19, 2021 (the “Equity Offerings”) were released to the Company given the satisfaction of the applicable escrow release conditions, and the 12,524,880 million subscription receipts that were issued were automatically converted into an equivalent number of common shares of the Company. The proceeds raised from the Equity Offerings were used to pay a portion of the cash closing price for the Acquisition and related transaction costs, as well as for general working capital purposes. Upon closing of the Acquisition, the Company has approximately $32 million of cash on hand and 43,634,832 common shares issued and outstanding.
CareRx is Canada’s leading provider of pharmacy services to seniors communities. We serve over 92,000 residents in over 1,500 seniors and other congregate care communities (long-term care homes, retirement homes, assisted living facilities, and group homes). We are a national organization with a large network of pharmacy fulfillment centres strategically located across the country. This allows us to deliver medications in a timely and cost-effective manner and quickly respond to routine changes in medication management. We use best-in-class technology that automates the preparation and verification of multi-dose compliance packaging of medication, providing the highest levels of safety and adherence for individuals with complex medication regimes. We take an active role in working with our home operator partners to promote resident health, staff education, and medication system quality and efficiency.